Fixing The Broadband Market And Protecting Net Neutrality By Prying Open Incumbent Networks To Meaningful Competition

from the your-promised-broadband-Utopia-never-arrived dept

While Title II is the best net neutrality option available in the face of a lumbering broadband duopoly, it still doesn't fix the fact that the vast majority of customers only have the choice of one or two broadband options. It's this lack of competition that not only results in net neutrality violations (as customers can't vote down stupid ISP behavior with their wallet), but the higher prices and abysmal customer service so many of us have come to know and love. Stripping away protectionist state laws can help a little, as can the slow rise of services like Google Fiber. But even these efforts can only go so far in blowing up a broadband duopoly, pampered through regulatory capture and built up over a generation of campaign contributions.

One solution is the return to the country's barely-tried implementation of unbundling and network open access, or requiring that the nation's subsidy-slathered monopolists open their networks to allow other competitors to come in and compete. There are many variations of this concept, and it's something Google Fiber promised in its markets before backing away from it (much like their vocal support of net neutrality). Obviously being forced to compete is an immensely unpopular concept for the nation's incumbent ISPs. Given that those companies dictate and often literally write the nation's telecom laws, these requirements were eliminated in a number of policies moves starting in 2001 and culminating in the FCC's Triennial Review Remand Order of 2004 (pdf).

This was amazingly presented at the time as a way to improve competition and spur investment, but primarily resulted in a bloodbath as dozens of consumer-friendly, smaller independent ISPs and CLECs were killed off, perpetuating and further cementing the noncompetitive duopoly we have today.

One of the few small ISPs to manage to run that gauntlet and survive it was California's Sonic.Net, which has since proceeded to not only build a sizable regional network of its own in California, but to manage to treat consumers well while doing it (Sonic has been praised by the EFF repeatedly for consumer-friendly data disclosure policies). In a blog post last week, Sonic.net CEO Dane Jasper notes that neutrality issues are just a symptom of the lack of competition, and to fix these we're going to need to start thinking differently:

"Lets call it like it is: in most of America, we’ve got a broadband duopoly at best. And it’s simple economic theory and best-practice capitalism that in an unregulated near-monopoly, you will see manifestations of policies, practices and behaviors that are not always customer friendly. If we accept that high speed Internet access is essential for modern life, the fact that we need a set of controls that assure that an entrenched operator won’t use their captive audience in an unreasonable way shouldn’t come as a surprise.

While neutrality is the topic of the day, the real fix is to reinvigorate competitive Internet access in America. Competitive access in Europe supported by legislation similar to The 1996 Act has resulted in lower costs for consumers and far more choices in Europe. What Michael Powell decided to do hasn’t worked out as well for Americans. Today’s FCC should return to the roots of the Telecom Act, and reinforce the unbundling requirements, assuring that they are again technology neutral. This will create an investment ladder to facilities for competitive carriers, opening access to build out and serve areas that are beyond our reach today."

This isn't just a pipe dream. While we pretended to try open access as a concept, we never tried very hard. For the few years it was attempted, incumbent ISPs repeatedly made cooperation impossible for a smaller carriers, intentionally sabotaging installs, delaying support calls, and generally doing their very best to make sure that the concept didn't work. Carriers paid regulators to nap on these issues before then FCC boss Michael Powell (now the top lobbyist for the cable industry) ultimately decided to kill the idea for good. This is, opponents of the idea will insist, somehow proof positive that the concept of open access doesn't work.

Except real-world data has repeatedly shown the open access model results in more competition and lower prices. This Berkman Center study (pdf) commissioned by the FCC (which the agency promptly ignored) showed the positive benefits of an open access model in a significant number of countries, including France. The result? French consumers, awash in competition, pay among the lowest prices anywhere for telecom services. This Venture Beat report from last week conveniently illustrates how an American that was paying Comcast and AT&T $230 every month had his mind blown by the experience of real competition:

"Now we live in the city center of Toulouse, France, in an apartment where I’m a broadband customer of a company called Numericable. Here’s what I get for $63 per month: 100 Mbps download speed, 250 cable channels, a home telephone with unlimited international calling, and a mobile phone that includes unlimited minutes and 3GB of data usage each month. (The only tradeoff was losing my unlimited AT&T data plan; but I also never come close to using 3GB.)...Separately, I’m getting ready to sign my wife up for a $20-per month mobile plan with mobile provider Free that comes with unlimited calling and 3GB of data."

Despite the fact this model clearly works, it's never considered in policy discussions as a serious possibility. Why? Quite simply because the incumbent providers don't want it. Through the use of their various PR folk, astroturfers, think tankers, fauxcademics and assorted hired mouthpieces, they've successfully managed to utterly vilify the concept, painting it as the very worst sort of government meddling in (not actually) free markets. Instead, we've chosen to head down the path of letting the nation's duopolists dictate telecom policy, and the end result should at this point be painfully obvious to everyone. Well, except the industry lobbyists who still somehow insist we're all living in a competitive broadband Utopia.

Reader Comments

there is one thing that USA corporations seem to have in common regardless of whether we look at the Entertainment industries, pharma industries or broadband industries, as soon as there is the slightest hint that there may be a new kid coming to the block, out come the envelopes of 'encouragement' which get handed out to those in Congress who cant grab them quick enough. in return, we get any and all laws made/enforced that can rid those industries of any and all competition. now whether these Congress Critters are thinking of anything other than what is coming to them, i dont know. maybe they think they are doing the right thing by removing competition but unless competition is given a chance, no one will truly know the answer! what is so sad is that those in Congress are supposed to think about the people, when in actual fact, no one is further from their minds!

Re: Re:

Are you suggesting there is some innate difference between corporations in the US versus those in other countries?

Not exactly. It's more that Europeans (and their legislators) have a more healthy skepticism with respect to corporations than do ordinary US legislators. The latter just see the money, while the former have the lessons of history to worry them.

Have I managed to counter your *ist bugaboos with sufficient examples to the contrary? I very strongly agree that corporations should be considered money making (and tax paying) engines, *and that's all*, but expecting machines to even understand ethics and morality is way beyond what should be expected of them.

However, please do go ahead and expect that of their boards of directors. I like accountability, as should everyone.

Re:

whether these Congress Critters are thinking of anything other than what is coming to them ...

Don't be ridiculous. They're busy building campaign chests and locking up ad spots for their next campaign.

You asked for it, by allowing it. It's a lot easier to stop bad stuff from being implemented than it is to roll back bad stuff once implemented. All it takes is eternal vigilance.

This is nothing new! We've always had to worry about packs of predators encircling us. Today's predators ("moochers") wear business suits and sic lawyers on us, and buy favors from our elected representatives. C'est la vie.

Re: Re:

Congress lives in an information bubble, completely unaware of what average daily life is like or how to do their own laundry.

Of course. They're too busy cashing donation cheques to their future campaign war chests. Pretty much everybody has known for a long time that this is all they do when they're not doing soundbites for the six o'clock news (aka "marketing" and "PR").

This could be fixed if enough people wanted to fix it. That it doesn't get fixed reflects on us, the electorate.

Everyone deserves the government they get, yes? Do people really prefer to be ruled by tyrants? It does appear to be so. When I was growing up, we thought that was an exclusively Russian thing (Stalinists loved Stalin). Now, it appears to have taken hold planetwide.

Me, I'm for shivving Nazis in the back or potting them with a sniper rifle from 300 yards, including anything that even smells like a Nazi (or a Soviet, ChiCom, TSA, SDA, ...).

Does SpaceX fit into the picture?

Recently, I read of Musk's interest in launching a fleet of µsatellites (http://www.cnet.com/news/elon-musk-confirms-ambitions-for-internet-satellites/). Let's just say this actually happened, could the duopolies throw up barriers as they have with Google Fiber? They would be outside of state and municipal reach, right?

Re: Re: Does SpaceX fit into the picture?

What barriers have they thrown up with Google Fiber?

Well, they came in after the fact and said they'd match G.'s efforts. Maybe he thinks that constitutes a barrier. I think it's proof of corporate lethargy. They see no need to bother with that competition stuff.

It's pretty amazing that G.'s shown them how easy it is to do, and how satisfied customers are to get it, and how eager other cities are to get onto G.'s list, yet what have the duop/monopolists done to match them?

In an ostensibly capitalistic economy (!!!), that just screams opportunity for competitors and startups, yet .

Re: Re: Does SpaceX fit into the picture?

@a non cow 212pm-

"They have never tried to stop satellites before."

au contraire, mon frere, they can and do STOP satellite companies ALL THE TIME: just *try* to sign up with one of the other satellite ISPs (hughesnet, wild blue, etc) and it will -LITERALLY- route you back to your present ISP who has NON-COMPETE agreements with EVERYONE...

i have been through this exercise in futility a number of times over the last 10+ years: when i call up ANY 'competitor', as SOON as they find out what my zip code is, they say 'sorry, we do not serve that area, we have a non-compete agreement with X...'

there were a number of times where it LITERALLY transferred me to my present (shitty) ISP when i input my zip code in a phone menu system...

so, yeah, they can haz all your bases, and you DO NOT have a choice, PERIOD...

Re: Re: Until this is fixed....

No, I believe they're correct. Lack of competition skews everything. Real competition that forces suppliers to consider consumers first would fix all of it. The FCC would be pretty much moot and just regulate (apply itself to enforcing the law).

How's it make you feel as a US citizen that Europeans enjoy far more competition in their marketplace than do you?

I question how you go about doing this. I agree, the cable companies/Verizon/AT&T are bad, but a company actually owns those lines, pays people to service them etc. To let a competitor come in and utilize those lines?

Of course, those lines are on private citizen right of ways granted by the city/state, but they still are "private property".

Internet via WiMAX, through power lines, wireless, nothing ever worked out, forcing a company to let a competitor use their property just seems kind of un-American.

Re:

... but a company actually owns those lines, pays people to service them etc.

Your tax dollars paid them for building it. They got money from your gov't to do that. You should wonder why your elected representatives are complicit with corporate robbers. Why are they selling you out to wolves who want to eat you?

Could the wolves have bought/bribed them for their silence? No way! Ya think?

Re:

The way they did this here in the Netherlands, where all the phone lines were owned by state telecom company KPN, is that KPN was forced to rent out their lines to competitors for a fixed price (€10,- per month if I recall correctly). This charge was passed on to the customers. Although it has to be said that local loop unbundling was only implemented on the phone (adsl) lines. Cable internet is effectively still a duopoly between Ziggo and UPC.

Re:

["I agree, the cable companies/Verizon/AT&T are bad, but a company actually owns those lines, pays people to service them etc. To let a competitor come in and utilize those lines?"]

And THAT is precisely the problem. Ma Bell had the same issues a while back, wherein they owned all of the telephone lines and prevented anyone else using them. It may take nationalizing all communication infrastructure, copper, fiber, and microwave, to force the communications companies to be fair and reasonable. As long as they can say "It's MINE and you can't use it without paying me a bunch!" they will do so. All network wiring should be public property and regulated under Title II.

Re: Re:

All network wiring should be public property and regulated under Title II.

That's one way. Understand though that you'll be subsidizing their build costs to provide it, as well as grandfathering in ca. 1940s style regulation.

The alternative that I'd prefer is eliminating their duo/monopoly, freeing them to act as businesses should be free to act, while expecting them to compete against their peers in an *open marketplace*. The less the gov't and regulators need to be involved in this, the better (for everyone concerned).

No, I'm not a shill, honest. I'm nobody. I want everyone to win in their own preferred way. I'm very tired of seeing consumers getting shafted while I watch many other markets (eg. Europe, Korea) function far more efficiently at far less cost, yet everyone involved is making out like bandits. I'm also sick of watching outfits like AT&T being forced to break up by law. For them, monopoly is simpler to deal with, so they go with the flow, as stupid as that is. It beats wasting money on ambulance chasers.

BTW, I'm none of Democrat, Republican, Liberal, Conservative, ... I just know this shouldn't be a battleground for any of us. We *all* want this stuff to work. *All of our futures* depend on this working.

That there are people living in the USA who can't buy decent connectivity in the 21st Century when it's easily available in other parts of the world is shameful. This should not be a difficult problem. This is not technically complex. It's politics, that's all. The solution to all political problems is communication.

Re: Re: Re:

The alternative that I'd prefer is eliminating their duo/monopoly, freeing them to act as businesses should be free to act, while expecting them to compete against their peers in an *open marketplace*. The less the gov't and regulators need to be involved in this, the better (for everyone concerned).

It'd take govt. and regulators to make that happen under anti-trust laws. We can't trade our way to a freer, more open market. We'll never have a completely free one but it can be made to be more fair, i.e. competitive, if we do as much as we can to eliminate protectionism.

Money-making machines cannot be controlled by supply and demand alone, and market forces alone can't change corporate behavior while "But property rights!!1eleventyone1!!" is applied to business models and practices because people get all het up when the word "property" and the notion of interfering with it is applied to anything.

TWC recently upgraded Internet connections in our area and now we get speeds up to 100 Mb/sec (at no additional cost from what we used to pay). While I don't get that I've done tests and, depending on when they're done, I'll get on average between 32 Mb/sec and ~55 Mb/sec downstream and even ~5.5 Mb/sec upstream which isn't too bad. I think we pay about $135/month with tax for cable (including two cable boxes and a DVR) and Internet. Granted there isn't meaningful competition around here (AT&T) but it does seem like they are catching up.

Re: Re: Unbundling and network open access

If everyone had the time to monitor their ISP this would be a workable idea. But we know that won't happen and we should not force the ISP to share as it never works without enforced wholesale pricing.

Competition Not Title II

Carl:

It looks like you have been reading my blogs. Title II is never the way to go if you believe in freedom and competition. Government regulation and freedom are oxymorons. Do you recall what Title II has in it? I've lived under Title II and it stifles innovation and free speech. It is not the answer; competition is the answer and we can have it here in the U.S. Finally Title II cements the role of incumbents and makes it unattractive for new entrants into the market.

We both agree that a duopoly is not competition. We also know that due to the high costs of building a last-mile network that having more than two facility providers in a market is not economically sustainable. The incumbents are acting predictable given the market conditions. I don't fault them or have any animosities against them, but I do feel that we can have better service at lower prices than our current situation.

Government intervention or takeover will only make the situation worse. Competition is the answer. Open-access of last-mile networks is the answer. I have been professing this philosophy since the mid-90s. I don't think that anyone will argue with stating that three or more service providers in a market will lower prices, improve service quality, and offer more choices. There are plenty of examples worldwide to back up this statement.

There are several models which open-access can be achieved and there isn't one way that is any better than the next which is why municipalities/counties should be able to choose the model right for their situation. Notice that I am saying that decision on how to build the open-access infrastructure should be on a local level. Evidence has shown that the chances of success are better when left up to cities to decide what will work for them. The only involvement from the federal level or FCC should be to help remove barriers that promote free and open competition.

I met with the Google Fiber folks in the early days before they decided to become a service provider. They were going to try these different business models and share the results freely. Too bad that they changed their minds, because it would have been very helpful in spreading the open-access concept.

Cities should pursue open-access infrastructure models to promote broadband competition in their communities. The should allow service providers to get together to build and share common network infrastructure. They should abandon outdated concepts like franchise fees and look offering reasonable right-of-ways and poll attachment fees. Local and state laws preventing competition should be eliminated.

I don't agree with cities entering the communications business because it is the reign of private enterprises. Also, the technology changes too rapidly for bureaucracies to keep up. History has shown a dubious success record for municipal broadband efforts. Cities are good at building infrastructure though. They are good at building and maintaining long-term projects like water, sewer, and road systems so why not build a fiber-based infrastructure? I would fully support that cities build, maintain, and sell on a non-discriminatory basis access to a last-mile broadband fiber network. The endeavor should be run as a separate taxpayer neutral enterprise. My studies have shown that if they approach a greater than 60% fill rate, they can actually become cash flow positive in 5-7 years while providing coverage across the city. Eventually incumbents will take advantage of this network to reduce the capital expense of having their own network.

This is a win-win-win situation for all without the impact of what federal regulation will bring. Net Neutrality will be inherent because no carrier will want to be accused at blocking certain sites. Customers will see the benefit to having different traffic types prioritized. Open-access will not happen overnight, but it can happen over the next couple of decades if cities realize that they can divorce the network from the service.

An dollar per mouth

I said long ago, in my blogs created, plus comments from other sites is a quick and easy solution.

But .., like politicians only listen to lobys, as we have problems caused by trivial things.

I mean,

What would raise € 1 or $ 1, having an ISP connection to download things, music, movies, etc ..?

Yes? Then multiply by the millions of users worldwide.

I am aware that in other countries this figure is high, the change of the currency, but in most Western countries, is more than acceptable, if not laughable. (Apologies).

As companies or companies Multimedia never lose money, profits, etc.

Always have incomes for something that has gone out of fashion, distant in time, etc, etc.but which can be downloaded by the consumer ISP contracted having such voluntary and legal option.

That's one thing ..,

Another thing is the indiscriminate control (personal observation as a user view Networks long), governments in the world, the politicians after all (in short), which only wish to impose their absurd protectionist ideas, and of course the influence of powerful groups to control citizens illegally.

Well one thing is supervision (no other legal) and another thing espionage (criminal practices permitted in some Western countries) is not regulated by the West.

So we have, you can not be competitive (competition - a term widely used by politicians to be popular with the technologies and economics among other things) and then is that governments spy on each other ..

How is anyone going to be competitive, a country, a state, a nation, a company, an entrepreneur, inventor, etc etc?

Hypocrisy, I said a while, and I stand ..

I have dared to comment on this pleasant place of technology it is not fair that Americans have to be pursued, while other people benefit from very good and are unaffected at all.

If an American citizen, I consider myself American brother, he would be outraged as a citizen and as a consumer.

Jokes aside, I'm not psychic, but politicians approve measures or laws, then it happens that brings news of layoffs of employees in companies affected directly or indirectly ---

collateral damage.And the workers of these companies are not guilty of anything, just trying to do their job well, and are the following day care ..:

- An envelope on the table of his desk, the notice of dismissal.

Dear mr. (Name) as you know in recent days have received sad news that affects our company, to which you belong, and feel communicate the termination for reasons outside the company.

We appreciate your work provided, and its sole dedication.

Enclosed is a letter of recommendation to facilitate their re-incorporation into other sister companies (friends - affiliates) andbranches of technology companies.